There’s an all-too-easy-to-violate maxim when covering politics: Don’t fall for the conventional wisdom. Alas, I recently did so when, at the start of the legislative session, Speaker Frank Chopp, D-Seattle, basically ruled out a sales tax increase to help close the (now) $2.8 billion budget shortfall. He said it wasn’t off the table, but that it was on the edge of the table and in the “final analysis” he didn’t think it would be the solution Democrats settled on.
The arguments against it? It’s too regressive. It could harm the state’s economic recovery. King County’s sales tax is already approaching the dreaded 10 percent mark. The tax polls badly. Look what happened in 2004 when voters soundly rejected a one-cent sales tax increase for schools.
So when Speaker Chopp all but dismissed the idea, I fell for it. He’s the Almighty Speaker after all. But now, as the legislative session hits the home-stretch, the sales tax has suddenly risen from the dead.
State Rep. Dennis Flannigan, D-Tacoma, who’s decided not to run for re-election, has introduced a temporary one-cent sales tax increase that would ratchet down as the unemployment rate drops. Washington’s Office of Financial Management projects the tax hike would expire in 2015 after raising several billion dollars. Flannigan has lined-up a respectable 15 co-sponsors to sign onto his bill. That constitutes a voting-block in the House.
By itself, the introduction of a sales tax bill would not be terribly noteworthy. But consider some other tea leaves. Last week, for instance, The Olympian’s Brad Shannon reported that a temporary sales tax hike is the preferred poison for House Majority Leader Lynn Kessler, D-Hoquiam, and House Budget Chair Kelli Linville, D-Bellingham — two of the most powerful House Democrats.
Meanwhile over in the Senate, Ed Murray, D-Seattle, told me last week, “I think some incremental sales tax increase is one of the things that’s being considered [in the Senate Democratic caucus]. It obviously brings in the most money quickly for a temporary period of time.” Although Murray says the Senate is considering at most a half-cent temporary increase, that would still raise roughly $500 million a year.
The across-the-board tax increase approach appeals to some lawmakers because, as reporter Shannon noted, “a temporary, general sales tax is easier to explain to voters.” It also spreads the pain as opposed to sticking it to specific consumers or businesses.
Contrast that with Gov. Chris Gregoire’s “menu” approach to taxes. Last week, Gregoire “stepped off the curb” — her words — and offered a baker’s dozen-plus-one of tax hikes that would bring in a projected $605 million through June of next year. Gregoire’s plan includes a tripling of the state’s hazardous materials tax, a tax on bottled water and soda, a dollar increase in the state cigarette tax, and a tax on candy and gum. Senate Republicans note that the governor’s proposal balloons to a $2 billion tax package in the 2011-13 biennium.
The Democratic governor told statehouse reporters that her goal is to target “discretionary” spending and not disrupt the state’s climb out of the recession. “I will say this in-artfully. I don’t believe the economic recovery of the state of Washington relies on cigarettes, candy, gum, bottled water, and pop. I don’t.”
Gregoire is clearly concerned that a sales tax hike might dissuade would-be consumers from making big purchases, like buying a new car , that are vital to the state’s revenue recovery. Asked if she would veto a sales tax increase if that’s what the legislature sends her, Gregoire replied: “I’m not going to put a line in the sand, but I’ve made it clear I find it troubling.” That certainly leaves an opening.
The next step for legislative Democrats, and it promises to be a painful one, is to find some consensus among themselves about what tax approach to take and how much to raise in taxes — no doubt more than the governor.
It’s not out of the realm of possibility that the House and Senate would split at the fork in the road, with one chamber going for the sales tax and the other for the governor's “menu” approach. In the end, perhaps a hybrid plan will emerge that enacts a small sales tax increase combined with sin taxes and closing tax “loopholes.”
Needless to say, angst over the budget and taxes is leaving majority Democrats hamstrung. The Senate scrubbed its plan for a budget roll out last week. Now the House may leapfrog the Senate and propose its budget first, on Tuesday, but without offering specific details of a tax plan. Senate Democrats plan to caucus long and hard today (Feb. 22), which happens to be George Washington's birthday, to see if they can come to some internal agreement in the hopes of rolling out a budget-and-tax combo plan at least by Wednesday.
Majority Democrats have less than three weeks to pass budgets off the House and Senate floors and then reconcile their differences (a potentially brutal process) before adjourning on March 11. While I still don’t believe it myself, a lot of people in Olympia are already predicting a special session will be necessary to get the job done.
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